What to Ask Your Mortgage Broker
Looks like the Reserve Bank of Australia (RBA) is finally going to cut the cash rate, which means it’s time to take action and make sure you’re getting the best deal on your mortgage.
If the RBA drops the cash rate, it’ll be the first time since November 2020, giving some much-needed relief to homeowners, property investors, and first-time buyers. The market is shifting, so now is a great time to take a step back and make sure you’re in the right financial position.
Most of our clients are really excited by the talk of rate cuts, and once we see some relief from the current rates, we expect it will boost the confidence in the market as well. Lower rates will also help to lower monthly repayments, but it often takes the banks a few weeks to pass on these benefits to their customers.
With a downward cycle expected to energise the mortgage market, it’s the perfect time to check in with your mortgage broker. Here are some questions we are hearing a lot lately:
How Will the Banks React to the RBA Rate Cut?
When the RBA cuts rates, banks don’t always react the same way. While they don’t have to reduce their rates, they’re usually under pressure to pass on at least some of the savings, especially with the cost of living being so high right now. Ultimately this is driven by Competition, which is still very strong in the mortgage market.
Each Bank will play it slightly differently. In general, most lenders will pass on the full rate one way or the other, but how they do it is different.
Banks always try and remain competitive for new clients, however, this does not always get passed on equally to existing home loan clients. A lot will depend on their competition and business strategies, however, it is often existing clients that miss out on the headline rates offered to new client, and pricing these loans with your existing banks seems to be harder than ever. It pays to be proactive with your banks, and keep your Mortgage Broker on speed dial.
You don’t want to miss out on a better deal just because the rates are going down, there could be far better options available to you if you looked into a refinance for instance. It’s the perfect time to chat with your broker and make sure you’re getting the best offer available. Most lenders are also rewarding their clients for having more equity in their properties, so if you have had some growth in your property value recently, you may be able to take advantage of this and get a much better rate.
That’s where your broker comes in—they’re keeping an eye on all the banks and can help you make the right choice.
Is Now a Good Time to Buy My First Home?
Buying your first home can be tricky, but we believe the rate cut could work in your favor. First-time buyers will have more borrowing power now, but that might also mean more people jumping into the market. This could push property prices up, so it’s a bit of a balancing act.
If you’re looking to buy, we recommends checking in with your broker to get a clear picture of what you can afford. “Ask your broker to run the numbers again, now that you might have a little more room to move, as it might make the difference between getting into the market now, or even waiting until the next rate cut.
The Government also has some great incentives to assist First home owners into the market such as the $30,000 First Home Owners Grant (Qld – New build homes only) and the Home Guarantee Scheme which could save you tens of thousands in Mortgage insurance if you qualify. To fully understand the available options, it is vital to speak to a good mortgage broker who can walk yu through all of the available options.
Is it is a Good time to Refinance?
With rates going down, it’s the perfect time to reconsider your mortgage. When rates drop, banks are going to be really eager to grab new customers, so this could be your chance to get a better deal—whether you’re refinancing or shopping around for a new loan. Banks seem to have less incentive to reprice their existing home loan clients at the moment, as they know that the process of refinancing can be a little arduous, however, with some of our clients saving almost 1% on their interest rates, sometimes it is worth going through the process.
Before jumping to a new lender, we always recommend checking in with your current bank first. Sometimes after you go through the whole refinancing process, your existing bank might suddenly offer to match the better deal. It’s worth asking them. If they don’t offer you a more competitive option, then it’s time to consider who else will.
Should I Reduce My Repayments after a rate reduction?
While a rate reduction often does result in lower repayments, just because you could pay less each month, it doesn’t mean you should. If you can afford it, it might be a good idea to keep your repayments the same. That way, you’ll pay off your loan faster and save on interest in the long run. This could wipe of years off your home loan.
It’s definitely worth checking with your bank to make sure you’re staying on track with your goals.
What about Investment Property?
If you’re an investor, the higher interest rates lately might have made things a little tough. Investors usually get higher rates than owner-occupiers, so now’s a good time to review your situation and ensure that it is competitive. This is the perfect time to strategise around your mortgage, reassess your investment goals and look into refinancing to obtain a competitive advantage on your rates.
We recommend talking to your broker about your options—whether you’re looking to refinance or adjust your investment strategy.
Will a Series of Rate Cuts Impact Property Prices?
Jon thinks the rate cuts could lead to some big changes in the property market with increased competition for property. Rental Yields have been much lower than interest rates for a while now, and as that gap closes, more investors will consider investing in property again. As more investors jump back into the market, demand will rise, which could continue to push prices up a bit where supply is already under pressure.
The shortage of available housing stock will potentially keep the pressure on house prices, especially in the South East Qld region leading up to the Olympic Games. Other regional areas are in a different cycle as well, and the lower rates may see more properties being listed for sale, potentially easing the supply side of the equation.
With the cash rate likely dropping, now’s the time to review your mortgage and make sure you’re set up with the best deal. A quick chat with a broker can make a big difference in how much you save and how quickly you pay off your loan. Don’t miss out—make sure you’re making the right moves!
